Marijuana stocks will be the next big thing, and investors are already betting on this nascent industry. The market is growing so fast that some companies have even seen their share prices triple in just three months! This bubble may burst soon, but there’s still plenty to learn here before you invest.
There are many CBD stocks to watch, but one of the most promising is Hempco Food and Fiber. It has a market cap of $35 million with a current share price of $0.06 per share. Read more in detail here: cbd stocks to watch.
The good news is that the COVID economy is on the mend. The first-quarter GDP growth rate in the United States was 6.4 percent, putting the country on track for its greatest year of growth since 1984.
What’s the bad news? Inflation is at an all-time high. In fact, it just surpassed a 13-year high. Reuters has some more information.
The CPI increased by 5.4 percent in the 12 months leading up to June. That was the biggest rise since August 2008, and it came after a 5.0 percent advance in May. After rising 0.7 percent in May, the CPI increased 0.9 percent after excluding the volatile food and energy components. After rising 3.8 percent in May, the core CPI increased 4.5 percent year over year, the biggest increase since November 1991.
Higher inflation is a danger not just to consumers, but also to the stock market.
CNBC has some more information.
Inflation is often seen as a negative for equities since it raises borrowing prices, increases input costs (materials, labor), and lowers living standards. But, perhaps most significantly in this market, it lowers profits growth forecasts, putting downward pressure on stock prices.
With inflation on the rise and showing no signs of abating, investors are naturally interested in learning how to safeguard their investments. Today, I’m going to show you a cannabis stock that may help you beat inflation.
- This early industry pioneer is established as a Real Estate Investment Trust (REIT), which has done well during inflationary times in the past.
- It pays a solid dividend yield of 2.8% that is a 100% premium to the S&P 500.
- Last quarter’s financial report revealed a 103 percent increase in sales over the same time the previous year.
Cannabis as an Inflationary Play
With a market capitalization of $5.8 billion, Innovative Industrial Properties (NYSE: IIPR) is one of the biggest cannabis businesses in the United States. IIPR is a real estate investment trust (REIT) based in San Diego, California, that rents cannabis growing facilities to some of the country’s biggest cannabis businesses.
Because of a few important reasons, REITs have historically performed well during times of rising inflation. Here’s what Zacks Investment Research has to say about it.
REITs, in particular, provide inherent inflation protection. Rents and real estate values, in particular, have a propensity to go north when prices rise, supporting dividend growth. Indeed, the majority of leases are linked to inflation, resulting in rent hikes when inflation rises. As a result, even during periods of high inflation, investing in the REIT sector may provide a consistent source of income. According to a study by REIT.com, REIT dividend hikes have outpaced inflation as assessed by the Consumer Price Index in all but three of the past 20 years.
IIPR could benefit from robust sales growth in addition to its REIT structure.
The business has been profiting from the booming cannabis market in the United States. That was evident in May’s first-quarter results, with quarterly sales of $43 million, up 103 percent from the previous year.
One of the cannabis industry’s oldest, best, and fastest-growing payouts has been fueled by this remarkable sales growth. IIPR paid a $1.32 quarterly dividend on April 15, a 32 percent rise over last year and a 6 percent increase over the previous quarter.
IIPR’s stock is on the verge of hitting a new all-time high.
One of the best-performing cannabis stocks is IIPR. In the past four years, the stock has increased by more than 1,000%.
Recently, the stock market has been putting pressure on the all-time high. In the next months, I believe we will see a breakthrough and a new high.
Innovative Industrial Properties 5-Year Chart (NYSE: IIPR)
Consider the Risks
Federal cannabis legalization, according to some experts, would be negative for IIPR since it might decrease the company’s rental prices.
For the time being, we believe such fears are exaggerated since federal legalization seems to be years away.
A Bigger Picture
The COVID economic recovery is underway, which has resulted in an increase in inflation.
Inflation has always been bad for equities, but Innovative Industrial Products (IIPR) is an exception. Because of its rental pricing power and fast-growing income, IIPR should provide security against the danger of inflation as a REIT.
About the Author & Cannabis Stock Trades
Michael Vodicka is a stock analyst with over 20 years of trading and investment expertise. His work has been published in some of the industry’s most prestigious journals. Since 2013, he has been investing and guiding investors in the cannabis industry.
Members of Cannabis Stock Trades benefit from Mr. Vodicka’s knowledge and advice.
Join Cannabis Stock Trades for unique research, trade alerts, and a model portfolio from Mr. Vodicka.
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